Spain’s Prime Minister, Pedro Sánchez, recently announced potential measures that have sparked concern among property buyers, investors, and industry professionals. During an economic forum on January 13th, the Prime Minister proposed an increase in taxes on property purchases in Spain made by buyers who are not EU-residents. While this announcement has caused unease, it is important to clarify the facts and context surrounding this proposal.
What Has Been Announced?
The Prime Minister’s proposal suggests a significant increase in the tax burden for "non-resident non-EU foreigners". He cited examples from other countries, such as Denmark and Canada, to justify the concept. Specifically, he mentioned a potential tax of up to 100% of a property’s value— an unprecedented figure in Spain. However, it is critical to understand that this is not a law but rather an idea shared in a public forum, and no formal proposal has been submitted for parliamentary approval. There is an election looming for Pedro Sánchez and many are dismissing this controversial plan as one just to secure votes.
What Do We Know So Far?
The government is reportedly considering two main options for implementing this change:
- Modifying the Transfer Tax: This tax is currently managed by regional governments, many of which are under opposition control, making nationwide implementation complex.
- Creating a New Tax: While a new tax targeting non-EU non-resident property buyers could be introduced, it may face legal challenges, as Spanish law prohibits multiple taxes on the same taxable event.
Spain’s Constitution mandates that the tax system must not have a confiscatory nature, meaning it cannot exhaust the taxpayer's wealth. A 100% tax would likely be challenged in court on European constitutional grounds.
Why Panic is Premature
- No Formal Legislation Yet: The proposal has not been drafted into a bill or debated in Congress. Approval from both Congress and the Senate is required before any measure becomes law.
- Legal and Political Challenges: Even if such a measure were passed, it would face scrutiny for constitutionality. Regional governments could also counteract its implementation.
- Lack of Clarity: The details and scope of the proposal remain unclear, even the target buyer is not clearly defined ("non-resident non-EU foreigners" could refer to nationality or to the country where they reside), and sensationalist media headlines have added to the confusion.
Additional Legislative Proposals
Separately, the government has hinted at subjecting some tourist accommodation activities to VAT. It is worth noting that certain tourist rentals are already subject to VAT if they include services typically provided by hotels.
Next Steps and Reassurance
This announcement is part of a broader discussion and will likely undergo significant debate and revision before any concrete changes are made. We recommend monitoring developments closely while staying informed through reliable sources.
At this stage, there is no need for alarm. Should any new regulations be enacted, we will provide detailed guidance to help you navigate the changes effectively.
Our company lawyers Martinez Echevarria have produced a short YouTube podcast on the subject & I would invite you to play it on the link here: https://www.youtube.com/watch?v=v6awhp5DGls
We are committed to keeping you informed and ensuring that any potential challenges are met with clarity and solutions. If you have questions or concerns, please do not hesitate to contact us.
Arthur J Conway Managing Director
Monarch Estates
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